The Privilege of Making Unwanted Investments

by Vinaya HS on April 8, 2013

in Finance

ICICI Bank’s Privilege Banking is awesome! If you’re “privileged” enough to have it, you can simply walk into any Branch, push a couple of buttons on the quirky token dispensing machine (an entirely optional step), and walk right up to the Privilege Banking Counter and get your work done while the rest of the “non-privileged” world waits for their token to show up on a TV screen/monitor.

The “privilege” of course comes with its own set of “grab-my-hard-earned-money” sales pitches and schemes.

The other day, I was at the said Privilege Banking Counter depositing a slightly high-value check (the proceeds from the sale of the Swift and which was already destined to pay off a bridge loan). One look at the amount on the check led to a barrage of questions from the guy manning the Privilege Banking Counter.

  • Sir, is this your annual bonus check?

  • Are you looking to make some investments?

  • Instead of closing your [bridge] loan, why don’t you earn a higher interest by making some investments?

  • Sir, are you sure that you do not want to earn a higher interest? [All the while looking at me as if I were quite foolish at declining the investment offer.]


Simple but firm NOs. Out of there in an instant.

Just experienced the “privilege” of making unwanted investments.

Have you?


I seem to be writing quite a bit about insurance of late. But I’m also seeing quite a number of absolutely “WTF?” insurance products of late. For example, see this piece on Birla Sun Life’s Classic Child Plan


To quote –

This joint-life, unit-linked, children’s plan covers both the child and the parent. Later, any time after the child attains majority, but before 27-years of age, he can become the primary life assured and the parent the secondary insured. The date on which this option is exercised is known as the Savings Date.

Prior to the Savings Date, on the death of the life assured (parent), the policy pays the Sum Assured (SA) to the nominee to take care of the child’s immediate financial needs. The future premium from the next policy year is borne by the insurer (called waiver of premium option). On the death of the child, the policy is terminated on the Savings Date and the Fund Value (FV) is paid. From the Savings Date onwards, upon the death of the child, the basic SA is paid. In both the cases, on the last death, of either the primary or the secondary life assured, the policy is terminated and the FV along with the commuted value of any future premiums (if any) is paid.

Seriously, what a complete mess! Why in heaven’s name would you want to be paid were your child to die? Have we as a race really become that cruel and insensitive? Let’s make money no matter how? I really wonder who designs such insurance plans. I so wish this plan dies a horrible death because there were exactly zero takers for it.


I was reading this ad for Bajaj Allianz Cash Rich Insurance Plan (in a recent issue of a personal finance magazine) when something about the calculations just didn’t seem right. In fact, they smelt downright fishy in painting a rosy picture of your retirement facilitated through this policy. I wanted to figure out who’s actually becoming cash rich here — You (as you’d obviously expect) or the Insurance Company?


First, how about the ridiculous Rs 10,284 as monthly premium for the next 240-months! Who, even in their worst financial state of mind, would be mad enough to get into such a contract to begin with? I then ran some simple calculations using Excel. As you can see, you turn into a real cash-cow for the Insurance Company a few years into the policy when the corpus accumulated with the Insurance Company exceeds the Sum Assured on the policy. When that happens — and that’s an event that is statistically guaranteed to have the highest probability of occurrence — the Insurance Company already has the cash (generated off the premiums you paid) to pay the Sum Assured. No sweat!


Then, I projected the numbers over the life of the plan. As you can see, the money that the Insurance Company is earning off you is several orders of magnitude higher than what its liabilities (what it owes you in the form of cash backs and one-time pay outs) are. Compounding at its brilliance. But compounding that’s against you!


I wonder who’d buy such a policy! You wouldn’t right?


Take a shirt. Stitch a pant to it. Then stick a pair of shoes to the pant. You really wouldn’t want to be seen wearing such clothes. Similarly, you wouldn’t want to buy the LIC Endowment plus Unit Linked Plan which purportedly combines Savings, Investment, and Insurance — in short, a guaranteed recipe to make you poor.

Features and Benefits.

If you could call them that.

My recommendation: Run as fast as you can in the opposite direction.


I first read about this pension plan in the ET dated June 22, 2010. I was intrigued. Basically, Reliance Life Traditional Golden Years Plan is a regular premium retirement plan that provides guaranteed return, which is declared at the beginning of every financial year during the product term. So far so good. But,

The minimum guaranteed accumulation rate [in other words, the return] will not be less than the savings bank deposit interest rate, as declared by the Reserve Bank of India.

WTF, mate? What kind of guarantee is this?

Next, I ran the numbers through this calculator — assumptions were 35 years policy/premium paying term and a monthly premium of Rs 6,000. Over a period of 35 years, you pay a whopping 6% of your total premium as Premium Allocation Fees and Policy Administration Fees. To further add insult to your injury, you also pay around 1.2% of the accumulated value at the end of each year as Account Administration Fees.

A guaranteed tension plan in my opinion.

My advise:

Over a period of 35 years, you’d do FAR FAR FAR BETTER simply by saving the same Rs 6,000 each month in a Public Provident Fund account.

What do you think?

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What Does Your ULIP Premium Do?

by Vinaya HS on May 13, 2010

in Finance

Makes you poor and your agent/insurer rich.

Look what I found in my email.

A job (commission-based) that allows you to be your own boss. Life insurance consultant with LIC of India (part-time or flexi-time). The job involves prospecting, understanding life insurance needs, advising on suitable options and closing the sale. It’s a freelance marketing job with attractive commissions not only at the time of sale but also so long as policy is in force.

For example, let’s assume that you bring in a total of 6,00,000 worth of premium in a year. On an average you will earn 2,00,000 in the first year, 60,000 in the second and third years and 40,000 every year till maturity of the policies. Fantastic earnings isn’t it. The renewal commissions will form a steady stream of income. This is self employment without investment.

In the most happening Bangalore City also named Wealth Bowl of India. Come be a part of this sunrise industry growing at more than 20%.

If this interests you,

Call xxxx xxxxx,
Development Officer, LIC of India

Now you know what that money you earnestly put in that ULIP all these years is doing. It’s making you poor and your agent/insurer stinking rich.

Avoid ULIPs. I can’t say this enough times.


The first time I saw this presentation (it was emailed to the administration head at my office), I screamed “WTF mate?” multiple times and in quick succession. Go through this presentation and give me one decent reason for why you would ever want to invest in this attractively packaged recipe for financial alchemy?

Slide #29 is a classic Warren Buffett trap. But if you’ve been following this blog, you already know that, if someone puts before you a financial offer that uses the words “you,” “Warren Buffett,” and “invest” in the same sentence, you should run away as fast as you can. And, you shouldn’t look back.

Awareness Fridays is an initiative to spread awareness on topics relevant to personal finance — every Friday. I urge you to take some time off and absorb this information — it’s pretty useful. And, as always, do spread the word if you find this useful.


I have an HDFC Bank Credit Card — one that I haven’t used since I received it over an year ago. I therefore decided to cancel it. A week back, I dropped a request-for-cancellation letter at an HDFC ATM near my house. Today morning, I called to check the status of my request. A few points from my conversation with customer care (my thoughts during the call within [ ]):

  • We have received the request letter. [Great!]
  • The card has been temporarily blocked. [Ok. Getting nervous.]
  • We’re working on canceling it permanently. [?]
  • But, why are you canceling the card? Blah blah…lifetime free…blah… [CANCEL]
  • We will upgrade the card to a Titanium Card. [WTF?]

Again, WTF mate?

I haven’t transacted a single time on this “standard” credit card and HDFC Bank wants to upgrade it to a Titanium Card (higher credit limits, extra dangerous to carry around, unwanted misery)! That aside, does HDFC Bank even care whether I have the capacity to repay? Isn’t this exactly what has happened elsewhere in the world? So, who was that who said that Indian banks are safe and sound?

What do you think?


That’s what a security guard at the Reebok store on 100 ft. Ring Road, Banashankari 3rd Stage said when I visited the store at 11:00 AM last Saturday.

I desperately needed a cap and I had committed to buy one then and there. Instead I was not allowed to step inside the store because — to quote the security guard — “the owners are already in the store, but you have to wait outside for five minutes because the salesperson has gone outside.”

WTF mate? Who am I? A committed-to-a-purchase customer or a criminal who wants to walk away with the store in broad daylight? You might have read, heard, and seen these fancy reports written by fancy experts projecting India to be “the thing” in retail. Ground reality is different. This experience at the Reebok store is not an isolated incident. Most retail outlets treat customers worse than criminals, with salespeople and security guards watching — with eyes that would rival a hawk’s — your every move.

And my response to the security guard was, “If that’s the way the owners want to run their business, no one’s going to step foot inside this store.” I actually wanted to say this to the owners, but hey, remember, I can’t go inside and talk to them because “though the owners are already in the store, I have to wait outside for five minutes because the salesperson has gone outside.”

What’s your “retail” experience been this far?

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How’s this for a bizarre experience?

Last week, I opted to open a savings account with ICICI Bank. I am given a welcome kit with an Internet banking password mailer dated April, 2007. I try to login but receive a “User ID has expired” error message. I call customer care who gleefully inform me that the system generated passwords automatically expire if unused for a year. So my password gleefully expired in April, 2008.

Then, WTF was I given a welcome kit with a pre-expired password? What a brilliant way to welcome a customer!

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Tweets on 2008-06-21

by Vinaya HS on June 21, 2008

in Finance

I hate Mutual Fund ads that harp on completely useless facts and then expect you to invest in them. The latest issue of Outlook Money carries an ad from Sundaram BNP Paribas who tout:

Blah blah blah…

Over a 28-year period, if you missed just the 10 best market days, the number of times your investment multiplied would be down from 137 to 53. If you missed the 40 best days, your investment would have multiplied just 8 times over 28 years!

An investment of Rs 75,000 would have made you a crorepathi now, if you had stayed continuously invested. If you had missed the best 40 days, your Rs 75,000 would now be worth just Rs 6 lac!

Blah blah blah…

WTF mate? Of what use are these nonsensical facts? Or are they meant to be psychologically seductive? Just for the record, 28 years ago, I was only a couple of months old. Maybe I should have somehow signaled to my parents to loan me Rs 75,000.

And lest you forget, past performance may or may not be sustained in the future.


From an ICICI Bank flyer,

FlexiCash is a special overdraft facility offered to salaried individuals. Simply put, it gives you the benefit of having a pre-approved and pre-sanctioned cash limit in your bank account.

With FlexiCash, you enjoy the double benefit of ready cash for what you need, whenever you need. From filling those shortfalls to the pleasures of shopping, from paying high interest liabilities to buying consumer durables to meeting your everyday needs, the money is now already in your bank account, ready to use.

WTF mate? How dumb does ICICI Bank think its customers are? FlexiCash lets you pay high interest liabilities being a high interest liability itself? What kind of Bank encourages you to go shopping, buy white goods, or meet everyday needs on an overdraft? Wake up CEO. Is this how you want to run your Bank?

I think the second paragraph was originally worded as:

With FlexiCash, you enjoy the double misery of ready cash for what you don’t need, whenever you don’t need it. From filling ICICI Bank’s treasury to draining your savings, from paying high interest liabilities (ROTFLMAO!) to watching your balance go negative to meeting ICICI Bank’s balance sheet needs, your money is now already on the way to our bank account, ready to lend again.

Since this fundamental truth cannot be printed, the wordings had to be changed.

I once had an overdraft facility on my Citibank Suvidha account. I called to close it. I was informed that once a line of overdraft is closed, I will not be given the option to start a new one again. I have never been happier than that one fleeting moment.


Reliance Mutual Fund has announced changes in the features of Reliance Index Fund (Nifty Plan and Sensex Plan) w.e.f. April 18, 2008. As per the proposed changes, the existing Reliance Index Fund’s name will be changed to Reliance Quant Plus Fund.

Source: Moneycontrol.

A classic “WTF mate?” situation. But this was to be expected sooner or later because, an Index Fund with astronomical expense ratios is guaranteed to consistently under perform the benchmark index and is absolutely guaranteed to make the fund house/fund manager rich and the poor investor poor. A Quant Fund with astronomical expense ratios, however, is guaranteed to make its investors destitute.

However, every dark cloud has a silver lining and there’s one here too.

All existing unit holders in the respective plans have the option to exit the fund at the prevailing Net Asset Value (NAV) without any exit load for a period of 30 days from March 18, 2008 to April 17, 2008. Unit holders who do not exercise the exit option by April 17, 2008 would be deemed to have consented to the proposed change.

Source: Moneycontrol.

If you’ve invested in Reliance Index Fund, my sincere advise is to cash out while you can. Next time around, look for a fund house with a better track record.

The fund house (Reliance Capital Asset Management) says,

We have our in-house model, which looks at various factors like valuation, earnings sentiments, price, momentum and shareholder’s value. Also, we would prefer to keep our portfolio’s sector weightage in line with the Nifty’s sector weight (in exceptional case, 20 per cent higher or lower). The investments in the portfolio will not necessary be equally weighted. The fund will be more of an active fund management approach than passive fund management and the rebalance will happen every week.

Source: Business Standard.

Translated into simple English it reads,

We’re clueless.


To learn how dangerous Quant Funds can be, read Lame Product: Lotus India Agile Fund — Another Great Opportunity To Play Diwali With Your Cash.


Tweets on 2008-04-01

by Vinaya HS on April 1, 2008

in Finance

Logged into my ICICI Bank account today morning in order to execute an urgent intra-bank transfer. Was greeted with the message:

On account of our financial year end, this service will not be available till 15:00 hours (IST).

Why should customers be inconvenienced just because a financial year ended? Can’t you close your books in any other way? On the other hand, a lot of banks take a holiday just to close their books.


Tweets on 2008-02-05

by Vinaya HS on February 5, 2008

in Finance

My recent experience at a State Bank of India ATM:

Successfully withdraw Rs 15,000 at 09:35 IST. Successfully withdraw Rs 10,000 at 09:36 IST. The third withdrawal at 09:37 IST pops up the message: “Sorry. Your daily withdrawal limit is Rs 15,000.”

WTF mate?

So much for technology and core-banking and what not. I should mention that I was using a card issued by a subsidiary of State Bank of India.


It pays to conduct due diligence before you dump your hard-earned money into any of the harebrained NFOs (New Fund Offers) from Mutual Fund houses in India.

For example,

ICICI Prudential Real Estate Securities Fund

The fund manager says that this is the first of a kind offering in India and with back of the envelope calculations he tells us that the fund will deliver around 13% year on year, if the stock market rises around 20% per year.

If relying on someone’s back of the envelope calculations is how you define your investment strategy, this fund’s for you. I wouldn’t touch this fund with a pole. And I absolutely hate lame portfolio theories.

ING Global Real Estate Fund

The fund manager also explained that since it invests in REITs (Real Estate Investment Trusts) and stocks in the commercial space, the fund does not have any exposure to the US sub-prime housing sector. However, as the fund manager himself confesses, if the sub-prime crisis and the global economic slowdown brings down commercial real estate rents, the performance of the fund will suffer.

The fund manager doesn’t trust his investment philosophy himself. Why the hell should you?

Classic “WTF mate?” products. Let me know if you still want to dump your money into these funds. I’d love to listen to your house mp3|Download Celine Dion MP3|Download Spice Girls

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I am not managing the fund, the model is. There is no fund manger required for a fund like this.

You’d be handing your cash over to a mathematical model running on a computer if you decide to invest in Lotus India’s Agile Fund — a quant fund currently doing its NFO (new fund offer).

So how much confidence can you place on the [secret] mathematical model to act in your best (i.e. profit making) interests?

We have back tested this fund down to 11.5 years and this has performed extremely well in a bear market as well as in bull markets.

Pretty confident eh? But dig around a bit and you’ll discover that:

The model used by the fund relies extensively on past data which may not necessarily be the best indicator of the future.

Still confident?

Finally, what does AGILE stand for? Alpha Generated from Industry Leaders Fund, where Alpha is a measure of the fund’s performance as against its benchmark index (which is the S&P CNX Nifty Index) and Industry Leaders is a diplomatic term for being vague.

This fund will redefine the product suite available in the market and will provide investors a model-based alternative to the existing value- and growth-based investing philosophies. Based on the extensive back-testing done, we believe that this offers an attractive additional asset allocation opportunity to equity mutual fund investors.

If you believe that financial jargon, this quant fund’s a great way to play Diwali, literally, with your hard earned cash.



From a full-page advertisement in today’s edition of Bangalore Mirror:

Bharti AXA Life Insurance presents a unit-linked insurance plan that guarantees you return of your first year premium of up to 175% at maturity and invests up to 100% of all your subsequent premiums.

What kind of financial misguidance is that? Incredible. I am being guaranteed the return of my first year premium at maturity! Way to go Bharti AXA — you just set the benchmark for financial suckiness (a measure of how much a financial product sucks). And in case you didn’t notice, up to 175% actually means anywhere from 0% to 175%; no guarantees on what that final figure will actually be.

A classic “WTF mate?” product. And don’t forget: Unit-Linked Insurance Plans (ULIPs) are akin to playing Diwali with your hard earned cash.

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Last week, I went to ICICI Bank’s Commissariat Road branch in order to obtain a loan foreclosure statement. What I ran out with, along with the foreclosure statement, was a lot of unwanted [investment] advice.

Here’s a sample:

The interest rate on your loan is just 10 percent! Why do you want to foreclose such a cheap loan? Did you know that the stock market has grown by 38 percent?

Why don’t you instead invest your [saved] EMIs in one of our schemes which will give you a return of 13 percent?

Where do you work? We can also help you with Section 88 income-tax savings.

[The lady then went on to explain an investment scheme that honestly made no financial sense whatsoever.]

I ran away — with my foreclosure statement — at the first opportunity I managed to get. All I wanted to do was foreclose my loan and here’s ICICI Bank trying its best to push me into perpetual debt.

I didn’t even have time to say “WTF mate?”

Have you ever had such unwanted advice from ICICI Bank?